You can set your students reading group/level for each of your classes. This level can be used for making the right skill level assignments to your students, and this information will be private to teachers only.
The student grade level, is his primary grade level which represents in which year he currently is in his school. This information is particularly for the student, and it is across all classes. This will help you understand if your students are doing work below/at/above their grade level.